Infineon Technologies upgraded to "accumulate"

03/22/07 - AC Research

LONDON, March 22 (newratings.com) - Analyst Sven Krupp of AC Research upgrades Infineon Technologies AG (IFX) from "hold" to "accumulate."

According to AC Research’s research note dated March 21 and published this morning, following a "Financial Times Deutschland" press report, the company’s mobile phone chip segment received a profitable major contract from mobile provider Vodafone. Under the terms of the contract, Infineon Technologies will produce chips for a new low-priced mobile phone to be launched by the British company. While experts estimate the contract volume in two-digit million figures, the contract will not show up in the company’s results before next year, the analyst mentions.

Only in February, the company was selected by Finnish mobile phone producer Nokia for the supply of base band and RF chips (Radio Frequency) for GSM mobile phones. Moreover, MasterCard selected the Munich-based company for the supply of security chips for its new chip-based card payment system. Infineon Technologies has also announced a tie-up with Korean automotive corporation Hyundai. Initially this cooperation will focus on the development of systems architecture and the respective chips for comfort electronics, such as light systems, air conditioners, and door modules. The first mutually developed chips are scheduled to be used in Hyundai and Kia vehicles from 2010, the analyst says.

It seems Infineon Technologies hosted a rather convincing performance with its products (single chip solution for EDGE mobile phones and the new single chip RF CMOS transceivers) at the 3GSM, which was held in Barcelona in mid-February. After all, the further developed chip platform helped to reduce mobile phone production costs by about 50%.

The newsflow at Infineon Technologies is brightening up. Therefore, the company should make the profit zone in the wireless communications chip business this year, AC Research believes. The analyst expects an additional positive sales effect at Infineon Technologies due to market adjustment effects in the segment of RF transceivers. On the other hand, price reductions in the market for DRAM chips will probably burden the results of the company’s subsidiary Qimonda.

The analyst expresses his optimism regarding Infineon Technologies being able to continue with a positive performance in view of the turnaround of the COM segment. The company should succeed in winning additional major contracts, thus alleviating pending losses following DRAM price reductions, AC Research believes.

In all, the analyst expects a somewhat positive development for the results of the chip producer. Therefore, the stock does not seem to enjoy too ambitious a rating, with Tuesday’s closing price of €11.41 and a 2006/2007 P/E ratio of roughly 29. Infineon Technologies has a rather impressive profit lever in the form of Qimonda, should DRAM prices go up again. The analyst views an attractive chances/risk ratio for an investment in the company’s stock.

AC Research upgrades Infineon Technologies from "hold" to "accumulate."